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I'm not 100% on this cyclical thing. Some reasons; 1) A well know component of capitalism is capital concentrates. When that 300 store pharmacy does get run in

I'm not 100% on this cyclical thing. Some reasons; 1) A well know component of capitalism is capital concentrates. When that 300 store pharmacy does get run inefficiently, local guy doesn't replace the pharmacy, some other PE goes and buys the badly run chain and fixes it, likely merging another company with a bunch of pharmacies on the way vs new entrants competing. I dont see the cycle returning to owner run, only being replaced by bigger and more efficient. 2) In my career I used to think companies with short term money extraction, like PE, were 'wrong' and should take a long term view for better business. However over time too often I see the 'quick buck focus' tends to win as while they do often erode the value/reputation of a company in that approach, they extract enough value quickly that they go buy the next company that was more conservative, rinse and repeat, and keep growing that way. This especially during the last era of cheap debt, though maybe that will change if rates go up.

jeffreyrogers 3y ago
The "quick buck" thing is a catchy meme but not really reflected in the statistics. While there are notable examples of companies that have been destroyed by PE investors they are rare and as a whole PE backed companies outperform after the PE group exits. See this for example https://www.institutionalinvestor.com/article/2bstpilo30bmb4x7lr18g/corner-office/pe-backed-companies-outperform-peers-but-what-happens-after-sponsors-leave https://www.institutionalinvestor.com/article/2bstpilo30bmb4... That is similar to other data I've seen, and given how loathed the industry is, the fact that it's hard to find contrary data suggests to me that it is accurate. The PE firms have to exit their investments so they are either selling to dumb buyers who don't realize that PE is value destroying, or they are actually creating value by improving operations and selling to intelligent buyers who are willing to pay for the improved company. The former is definitely possible but you'd think after 40 years buyers would get smarter if that were the case.

jeffreyrogers 3y ago

The "quick buck" thing is a catchy meme but not really reflected in the statistics. While there are notable examples of companies that have been destroyed by PE investors they are rare and as a whole PE backed companies outperform after the PE group exits. See this for example https://www.institutionalinvestor.com/article/2bstpilo30bmb4x7lr18g/corner-office/pe-backed-companies-outperform-peers-but-what-happens-after-sponsors-leave https://www.institutionalinvestor.com/article/2bstpilo30bmb4... That is similar to other data I've seen, and given how loathed the industry is, the fact that it's hard to find contrary data suggests to me that it is accurate. The PE firms have to exit their investments so they are either selling to dumb buyers who don't realize that PE is value destroying, or they are actually creating value by improving operations and selling to intelligent buyers who are willing to pay for the improved company. The former is definitely possible but you'd think after 40 years buyers would get smarter if that were the case.